2019 WI 6

SUPREME COURT OF WISCONSIN

CASE NO.: 2016AP1631

COMPLETE TITLE: Steadfast Insurance Company,

 Plaintiff-Respondent,

 v.

Greenwich Insurance Company,

 Defendant-Appellant-Petitioner.

REVIEW OF DECISION OF THE COURT OF APPEALS

Reported at 380 Wis. 2d 184, 908 N.W.2d 502 

PDC No: 2018 WI App 11 - Published

OPINION FILED: January 25, 2019

SUBMITTED ON BRIEFS:

ORAL ARGUMENT: October 29, 2018

SOURCE OF APPEAL:

COURT: Circuit

COUNTY: Milwaukee

JUDGE: Glenn H. Yamahiro

JUSTICES:

CONCURRED: A.W. BRADLEY, J. concurs and dissents, joined by 

DALLET, J. (opinion filed).

R.G. BRADLEY, J. concurs and dissents (opinion 

filed).

DISSENTED:

NOT PARTICIPATING: 

ATTORNEYS:

For the defendant-appellant-petitioner, there were briefs 

filed by Pamela J. Tillman, Esq., Michael J. Cohen, Esq., and 

Meissner Tierney Fisher & Nichols S.C., Milwaukee; with whom on 

the briefs were Thomas G. Drennan, Esq., and Dinsmore & Shohl 

LLP, Chicago, Illinois. There was an oral argument by Michael 

J. Cohen. 

For the plaintiff-respondent, there was a brief filed by 

Monte E. Weiss, Charles W. Kramer, and Weiss Law Office, S.C., 

Mequon. There was an oral argument by Monte Weiss.
2019 WI 6

NOTICE

This opinion is subject to further 

editing and modification. The final 

version will appear in the bound 

volume of the official reports. 

No. 2016AP1631

(L.C. No. 2013CV1685)

STATE OF WISCONSIN : IN SUPREME COURT

Steadfast Insurance Company,

 Plaintiff-Respondent,

 v.

Greenwich Insurance Company,

 Defendant-Appellant-Petitioner.

FILED

JAN 25, 2019

Sheila T. Reiff

Clerk of Supreme Court

REVIEW of a decision of the Court of Appeals. Affirmed in 

part, reversed in part. 

¶1 PATIENCE DRAKE ROGGENSACK, C.J. We review a decision of the court of 

appeals1affirming the circuit court's2grant of summary judgment to Steadfast Insurance 

Company (Steadfast). Summary judgment granted Steadfast the right to recover from 

Greenwich Insurance Company (Greenwich) based on Steadfast's and Greenwich's relationships 

 

1 Steadfast Ins. Co. v. Greenwich Ins. Co., 2018 WI App 11, 

380 Wis. 2d 184, 908 N.W.2d 502.

2 The Honorable Glenn H. Yamahiro of Milwaukee County 

presided.
No. 2016AP1631 

2

with Milwaukee Metropolitan Sewerage District (MMSD), who was sued for alleged negligent 

inspection, maintenance, repair, and operation of Milwaukee's sewerage system.

¶2 MMSD tendered its defense to both Steadfast and Greenwich. Steadfast accepted 

the tender; Greenwich did not, claiming that its policy was excess to Steadfast's based on its 

"other insurance" clause. Steadfast disagreed and sued Greenwich to recover the defense costs it 

paid to MMSD and the attorney fees incurred in suing Greenwich to reimburse it for those 

defense costs. 

¶3 First, we conclude that Greenwich, who insured the risk that United Water 

Services Milwaukee, LLC (United Water) would negligently perform services for MMSD, 

thereby causing damage, and Steadfast, who for a different period of time insured the risk that 

Veolia Water Milwaukee, LLC (Veolia) would negligently perform services for MMSD, thereby 

causing damage, were both primary and successive insurers in regard to MMSD, their common 

additional insured.3 

¶4 Second, we conclude that Greenwich breached its contractual duty to defend 

MMSD. Third, we conclude that Steadfast's contractual subrogation claim against Greenwich 

was timely filed as it comes within the six-year statute of limitations for contract actions. 

¶5 Fourth, we conclude Steadfast had a contractual duty to defend MMSD that was 

not abrogated by Greenwich's breach of its contractual duty to defend MMSD. Therefore, we 

apply a pro-rata allocation of defense costs Steadfast paid to MMSD based on Steadfast's and 

Greenwich's respective policy limits of $30 million and $20 million. Fifth, and finally, we 

 

3 Veolia Water North American Central, LLC, d/b/a Veolia 

Water Milwaukee, LLC, is a wholly owned subsidiary of WASCO LLC, 

who is the actual named insured on the Steadfast policy. Veolia 

and United Water were sued for sewage backups as well as MMSD. 
No. 2016AP1631 

3

conclude that Steadfast is entitled to recover attorney fees from Greenwich due to Steadfast's 

stepping into the shoes of MMSD through contractual subrogation to force Greenwich to pay 

defense costs. 

¶6 Accordingly, we affirm the decision of the court of appeals in part and reverse it 

in part.

I. BACKGROUND

¶7 This dispute arises out of historic rains that occurred in Milwaukee in June 2008. 

Those heavy rains overwhelmed MMSD's sewerage system, which resulted in raw sewage 

backing up into more than 8,000 homes. Lawsuits were filed against United Water, Veolia and 

MMSD because of sewage backups, alleging negligence in the repair, maintenance, and 

operation of the sewerage system both before and during the heavy rains.4 

¶8 Beginning in 1998, MMSD entered into Operating Agreements with private 

companies to operate and maintain its sewerage system. United Water provided operational 

services for many years. MMSD's Operating Agreement with United Water required United 

Water to maintain comprehensive liability insurance, naming MMSD as an additional insured. 

United Water contracted with Greenwich for liability insurance with the last contract of 

insurance beginning July 24, 2007 and ending July 24 2008; it named MMSD as an additional 

insured. The Greenwich policy limits were $20 million. United Water maintains that it last 

provided services under an Operating Agreement with MMSD on February 29, 2008. 

 

4 Banicki, et al. v. Veolia, et al., Milwaukee Cty. Case 

No. 09-CV-1860; Westmoreland v. Veolia, et al., Milwaukee Cty. 

Case No. 09-CV-6121; FM Global v. Veolia, et al., Milwaukee Cty. 

Case No. 09-CV-7594; Reep, et al. v. City of Milwaukee, et al., 

Milwaukee Cty. Case No. 09-CV-3483. FM Global and Westmoreland

were eventually consolidated into Banicki. 
No. 2016AP1631 

4

¶9 Beginning on March 1, 2008, and continuing through the June 2008 heavy rains, 

MMSD contracted with Veolia to operate and maintain its sewerage system. Their Operating 

Agreement similarly required Veolia to maintain comprehensive liability insurance, naming 

MMSD as an additional insured. Steadfast provided the required insurance to Veolia, with 

policy limits of $30 million. 

¶10 The Greenwich policy obligated it to defend any claim 

against its insureds, United Water and MMSD, as well as to 

provide indemnification: 

With respect to the insurance afforded by this Policy, 

the Company shall defend any CLAIM against the INSURED 

seeking DAMAGES to which this insurance applies, even 

if any of the allegations are groundless, false or 

fraudulent. Defense counsel may be designated by the 

Company or designated by the INSURED . . . .

¶11 In a similar fashion, the Steadfast policy gave 

Steadfast "the right and duty to assume the adjustment, defense 

and settlement of any 'claim' to which this insurance applies." 

Steadfast's policy, which insured Veolia and MMSD, also 

contained a subrogation clause, which stated in relevant part:

In the event of any payment under this policy, we 

shall be subrogated to all an "insured's" rights of 

recovery against any person or organization. An 

"insured" shall execute and deliver instruments and 

papers and do whatever else is necessary to secure 

such rights. An "insured" shall do nothing to 

prejudice such rights. 

¶12 After MMSD tendered its defense to both Steadfast and 

Greenwich, it opted to hire its own counsel. The lawsuits were 

settled without MMSD paying plaintiffs' claimed damages. 

Steadfast participated in MMSD's defense by reimbursing MMSD for 
No. 2016AP1631 

5

$1.55 million in defense costs. However, when MMSD tendered its 

defense to Greenwich and Steadfast, there was no way of knowing 

that settlement would be achieved without paying something 

toward claimed damages. 

¶13 Greenwich, who had refused MMSD's tender, had sent 

MMSD a letter explaining that "we fail to see how [United Water] 

could be liable for causing a sewage backup in June 2008 when 

its services for MMSD terminated in February 2008." Greenwich 

further argued that "there is ample evidence that when [United 

Water] turned over operational responsibilities to Veolia and 

MMSD in February 2008, all systems, equipment, and machinery at 

the subject sewage overflow diversion chamber were functioning 

according to operational protocols." 

¶14 One year later, MMSD renewed its tender to Greenwich. 

It informed Greenwich that United Water had been named as a 

defendant in lawsuits that resulted from the 2008 sewage 

backups. Greenwich responded five months later, acknowledging 

that "there may be a potential for coverage" and requesting 

"additional information in order to determine Greenwich's 

current coverage obligations." After receiving the requested 

information, including confirmation that MMSD had satisfied its 

$250,000 self-insured retention amount, Greenwich continued to 

refuse the tender of MMSD's defense. Instead, it unilaterally 

determined based on its "other insurance" clause that its policy 

was excess to Steadfast's $30 million liability limit. 

¶15 After the conclusion of the lawsuits that resulted 

from the sewage backups, Steadfast sued Greenwich to recover the 
No. 2016AP1631 

6

$1.55 million in defense costs that it had paid to MMSD. The 

circuit court granted summary judgment in favor of Steadfast, 

awarding it the entire amount Steadfast paid MMSD, as well as 

$325,000 in attorney fees that Steadfast incurred bringing this 

lawsuit.

¶16 The court of appeals affirmed. Steadfast Ins. Co. v. 

Greenwich Ins. Co., 2018 WI App 11, ¶4, 380 Wis. 2d 184, 908 

N.W.2d 502. The court of appeals based its decision on the 

following conclusions: 

(1) Greenwich's policy provided primary, not excess, 

coverage for claims against MMSD; (2) MMSD has 

established that it met the $250,000 risk retention 

amount by incurring $594,302.23 in defense costs; 

(3) Steadfast's equitable subrogation claim is timely 

because the six-year statute of limitations in Wis. 

Stat. § 893.43 applicable to contract claims applies 

to Steadfast's claim, which is premised on Greenwich's 

breach of the duty to defend MMSD; (4) under the facts 

of this case, because Greenwich breached its duty to 

defend MMSD, Greenwich is not equitably entitled to an 

allocation of MMSD's defense costs; and (5) under the 

facts of this case, Steadfast is equitably entitled to 

recover attorney fees in this lawsuit.

Id. We granted Greenwich's petition for review, and now affirm 

in part and reverse in part. 

II. DISCUSSION

A. Standard of Review

¶17 We review summary judgment decisions independently, 

applying the same methodology as the circuit court and the court 

of appeals, while benefitting from their discussions. Dufour v. 
No. 2016AP1631 

7

Progressive Classic Ins. Co., 2016 WI 59, ¶12, 370 Wis. 2d 313, 

881 N.W.2d 678. 

¶18 We also review insurance contract clauses 

independently of decisions of the circuit court and court of 

appeals, while again benefitting from their discussions.

Wadzinski v. Auto-Owners Ins. Co., 2012 WI 75, ¶10, 342 Wis. 2d 

311, 818 N.W.2d 819. Therefore, whether a party is entitled to 

attorney fees based on contractual subrogation is a question of 

law for our independent review. Estate of Kriefall v. Sizzler 

USA, 2012 WI 70, ¶16, 342 Wis. 2d 29, 816 N.W.2d 853.

¶19 Determining which statute of limitations applies to 

contract issues involves a question of law that we also decide

independently. Zastrow v. Journal Commc'ns, Inc., 2006 WI 72, 

¶12, 291 Wis. 2d 426, 718 N.W.2d 51. And finally, the proper 

measure of damages for an insurer's breach of a contractual duty 

to defend is likewise a question of law that we review 

independently. Newhouse v. Citizens Sec. Mut. Ins. Co., 176 

Wis. 2d 824, 837, 501 N.W.2d 1 (1993). 

B. Contract Interpretation

¶20 The issues in this case all stem from Greenwich's 

insurance contract with United Water and Steadfast's insurance 

contract with Veolia. Each policy listed MMSD as an additional 

insured. Therefore, the following general principles of 

contract interpretation guide our initial discussion. 

Wadzinski, 342 Wis. 2d 311, ¶11. 

¶21 Our general task in contract interpretation is to 

determine and carry out the parties' intentions. Preisler v. 
No. 2016AP1631 

8

Gen. Cas. Ins. Co., 2014 WI 135, ¶18, 360 Wis. 2d 129, 857 

N.W.2d 136. The parties' intentions are presumed to be 

expressed in the language of the contract. Wadzinski, 342 

Wis. 2d 311, ¶11. Where the language of a contract is 

unambiguous and the parties' intentions can be ascertained from 

the face of the contract, we give effect to the words they 

employed. Estate of Kriefall, 342 Wis. 2d 29, ¶21. However, if 

the policy terms are ambiguous, we construe the policy from the 

perspective of a reasonable insured. Wadzinski, 342 Wis. 2d 

311, ¶11. 

1. Risk and Loss

¶22 Greenwich and Steadfast issued comprehensive liability 

insurance policies, which their Operating Agreements with MMSD 

required. As a general matter, liability policies insure risks 

that are dependent on various circumstances that cause insureds 

to obtain insurance coverage. Couch on Insurance § 101:3 (3rd 

ed. 1999). Stated otherwise, risk is the "type of liability the 

insurer agreed to provide coverage for under the terms of the 

policy." Id. There is a causal connection between risk and 

loss.5 Id. That is, when the insured-for risk occurs, the 

insurer indemnifies for the resulting-loss (damages) in accord 

 

5 The Illinois Supreme Court recently provided a useful 

distinction between risk and loss in the insurance context. 

Courts analyze risk by looking prospectively at what the parties 

set out to cover. Home Ins. Co. v. Cincinnati Ins. Co., 821 

N.E.2d 269, 281 (Ill. 2004). Loss, in contrast, is analyzed 

retrospectively by looking at the injury or damages actually 

sustained in a particular case. Id.
No. 2016AP1631 

9

with the policy provisions. Id. Insurance policy clauses "may 

come into conflict" when two or more policies cover the same 

risk for the same period of time. Id., § 219:2. 

¶23 In the context presented herein, Greenwich's policy 

insured the risk that United Water's conduct in managing the 

Milwaukee sewerage system during the policy period would be 

negligent, thereby causing damage to a third party.6 As an 

"additional insured" under the Greenwich policy, MMSD's risk was 

that it would be responsible in money damages for a third 

party's damage caused by United Water's negligence. 

¶24 Steadfast's policy insured the risk that Veolia would 

negligently manage the Milwaukee sewerage system during the 

policy period, causing damage to a third party.7 As an 

 

6 The Greenwich policy provides in relevant part: Coverage 

B – CONTRACTOR'S POLLUTION LEGAL LIABILITY

To pay on behalf of the INSURED all LOSS, in excess of the 

Retention amount . . . which the INSURED becomes legally 

obligated to pay as a result of an OCCURRENCE which arises out 

of CONTRACTING SERVICES and which first commenced during the 

POLICY PERIOD. 

. . . .

G. INSURED means the NAMED INSURED and:

. . . .

7. Solely as respects Coverage B – Contractor's Pollution 

Legal Liability, the client for whom the NAMED INSURED 

performs or performed covered CONTRACTING 

SERVICES . . . .

7 The Steadfast policy provides in relevant part: 

CONTRACTOR'S POLLUTION LIABILITY . . . .

(continued)
No. 2016AP1631 

10

"additional insured" of Steadfast, MMSD's risk was that it would

be responsible in money damages for a third party's damage 

caused by Veolia's negligence. The plain language of both the 

Greenwich policy and the Steadfast policy obligated insurers to 

indemnify and defend their named insureds and MMSD against 

claims of damage caused by the negligence of their named 

insureds. To clarify further, while United Water was not 

providing services at the time of the flooding, it was alleged 

that its services during an earlier time when it was managing 

the MMSD system were a cause of the resulting damage. 

¶25 "Other insurance" clauses may be raised in disputes 

between two insurance companies about whose policy is primary 

and therefore must pay first and whose policy is excess, also 

referred to as successive insurance, and pays subsequent to the 

primary payment. Plastics Eng'g Co. v. Liberty Mut. Ins. Co., 

 

We will pay on behalf of an "insured" any "loss" an "insured" is 

legally obligated to pay as a result of a "claim" caused by a 

"pollution event" resulting from "covered operations" or 

"completed operations" of the "covered operations" and provided 

that the "covered operations" must commence on or after the 

"retroactive date" and before the end of the "policy period" and 

the "claim" is first made against the "insured" during the 

"policy period" . . . . 

. . . .

L. "Insured" means:

1. You or your; . . .

4. Any other person or organization endorsed onto this 

policy as an "insured." (Milwaukee Metropolitan 

Sewerage District is an endorsee.)
No. 2016AP1631 

11

2009 WI 13, ¶48, 315 Wis. 2d 556, 759 N.W.2d 613. To explain 

further, policies may be concurrent, i.e., cover the same time 

period and risk, or successive, i.e., cover different time 

periods and risks. However, "other insurance" clauses do not 

apply unless two policies are concurrent. Id. "The accepted 

meaning of 'other insurance' provisions does not include 

application to successive insurance policies." Id. If the 

"other insurance" clauses cannot be used to establish a primary 

and an excess insurer, then "neither insurer is given priority 

over the other and each contributes toward the loss pro rata." 

Oelhafen v. Tower Ins. Co., 171 Wis. 2d 532, 536-37, 492 N.W.2d 

321 (Ct. App. 1992) (citing Schoenecker v. Haines, 88 Wis. 2d 

665, 672, 277 N.W.2d 782 (1979)).

¶26 As we have explained, concurrent insurance is required 

before "other insurance" clauses are triggered. Two insurance 

policies cannot be concurrent unless they insured "the same 

risk, and the same interest, for the benefit of the same person, 

during the same period." Plastics Eng'g, 315 Wis. 2d 556, ¶48 

(quoting Douglas R. Richmond, Issues and Problems in "Other 

Insurance," Multiple Insurance, and Self-Insurance, 22 Pepp. L. 

Rev. 1373, 1376-82 (1995)). 

¶27 The Greenwich and Steadfast policies were primary with 

regard to each company's respective insurance of United Water 

and Veolia. The policies were primary and successive in regard 

to insuring MMSD's risk of damage because each policy relied on 

the negligence of a different insured, whose alleged negligence 

occurred during a different period of time, i.e., while that 
No. 2016AP1631 

12

primary insured was maintaining the sewerage system. Stated 

otherwise, Greenwich would owe MMSD only if the negligence of 

United Water caused damages for which MMSD was held responsible 

and Steadfast would owe MMSD only if the negligence of Veolia 

caused damages for which MMSD was held responsible. 

Accordingly, we do not interpret the terms of the "other 

insurance" clauses because under the undisputed facts as set out 

above, Greenwich's "other insurance" clause provided successive 

insurance to MMSD. 

¶28 In addition, the duty to defend is broader than the 

duty to indemnify. Acuity v. Bagadia, 2008 WI 62, ¶52, 310 

Wis. 2d 197, 750 N.W.2d 817 (explaining that the duty to defend 

arises from allegations in the complaint, while the duty to 

indemnify is dependent on fully developed facts). Furthermore, 

when an insurance policy provides potential coverage for one 

claim alleged in a lawsuit, the insurer must defend the entire 

suit, even when the claims are groundless. Fireman's Fund Ins. 

Co. of Wis. v. Bradley Corp., 2003 WI 33, ¶21, 261 Wis. 2d 4, 

660 N.W.2d 666. Accordingly, two insurance policies that insure 

separate and distinct risks may nevertheless become implicated 

in the same lawsuit, causing the two insurers to defend the same 

loss in the form of their mutual insured's alleged liability for 

damages and defense costs. 

2. Greenwich Breached Its Duty To Defend

¶29 We have established a procedure for an insurance 

company to follow when it disputes coverage. Wis. Pharmacal 

Co., LLC v. Neb. Cultures of Cal., Inc., 2016 WI 14, ¶18, 367 
No. 2016AP1631 

13

Wis. 2d 221, 876 N.W.2d 72 (explaining that an insurer may avoid 

breaching its duty to defend by requesting a bifurcated trial on 

the issues of coverage and liability, with liability determined 

after coverage has been established); Newhouse, 176 Wis. 2d at 

836 (stating that the insurer should request a bifurcated trial 

on the issues of coverage and liability when coverage is 

disputed). An insurer who fails to follow this procedure risks 

breaching its duty to defend if its coverage determination was 

wrong. Id. at 837.

¶30 Alternatively, an insurer may choose to reject the 

insured's tender of defense based on its determination that the 

claim is not covered under the policy. However, it does so at 

its own risk. Marks v. Houston Cas. Co., 2016 WI 53, ¶41 n.21, 

369 Wis. 2d 547, 881 N.W.2d 309. If the insurer is wrong about

its potential coverage obligation, it "is guilty of a breach of 

contract which renders it liable to the insured for all damages 

that naturally flow from the breach." Id. (citing Newhouse, 176 

Wis. 2d at 837). Finally, as mentioned earlier, an insurer has 

a duty to defend the entire lawsuit "when an insurance policy 

provides [potential] coverage for even one claim made in a 

lawsuit." Fireman's Fund Ins. Co., 261 Wis. 2d 4, ¶21.

¶31 In this case, Greenwich did not seek a judicial 

determination of its coverage obligations, nor did it pay any 

amount toward MMSD's defense costs. Instead, it chose to rely 

on its own unilateral determination that its policy was excess 

to Steadfast's. As we have explained, Greenwich's unilateral 

determination was erroneous; Greenwich's policy provided 
No. 2016AP1631 

14

potential coverage for a claim made in lawsuits based on sewage 

backups. Therefore, Greenwich breached its duty to defend, and 

it is responsible for all damages that naturally flow from the 

breach. Marks, 369 Wis. 2d 547, ¶41 n.21.

3. Steadfast's Contractual Subrogation Claim

¶32 Steadfast asserts that it has a contractual 

subrogation claim against Greenwich due to its payment of $1.55 

million in defense costs and Greenwich's failure to provide a 

defense. Greenwich asserts that if Steadfast has a claim, it 

sounds in contribution, not subrogation. Greenwich further 

asserts that the time has passed in which to bring a 

contribution claim. 

¶33 Subrogation is the "substitution of one party for 

another whose debt the party pays, entitling the paying party to 

rights, remedies, or securities that would otherwise belong to 

the debtor." Dufour, 370 Wis. 2d 313, ¶15. "The doctrine of 

subrogation enables an insurer that has paid an insured's 

loss . . . to recoup that payment from the party responsible for 

the loss." Id. (citations omitted). The insurer "steps into 

the shoes" of its insured and pursues the legal rights or claims 

to which the insured would have been entitled. Wilmot v. Racine 

Cty., 136 Wis. 2d 57, 63, 400 N.W.2d 917 (1987).

¶34 Contribution claims sometimes occur between joint 

tortfeasors, or in other circumstances, where one person has 

paid more than that person's share of a joint obligation. Kafka 

v. Pope, 194 Wis. 2d 234, 241, 533 N.W.2d 491 (1995) (concluding 

that "[w]hether the common obligation be imposed by contract or 
No. 2016AP1631 

15

grows out of a tort, the thing that gives rise to the right of 

contribution is that one of the common obligors has discharged 

more than his fair equitable share of the common liability."). 

¶35 Subrogation may arise in three different forms: 

contractual, statutory, and equitable subrogation. Estate of 

Kriefall, 342 Wis. 2d 29, ¶37. In a subrogation claim, the 

subrogee seeks payment based on rights the subrogee acquired 

from another. Millers Nat'l Ins. Co. v. City of Milwaukee, 184 

Wis. 2d 155, 168, 516 N.W.2d 376 (1994). The "purpose of 

subrogation is to place the loss ultimately on the wrongdoers." 

Cunningham v. Metro. Life Ins. Co., 121 Wis. 2d 437, 444, 360 

N.W.2d 33 (1985). When express contractual subrogation is 

claimed, we examine the policy's provisions. Id. at 449. We 

have given effect to express subrogation clauses contained in

insurance contracts. Id. at 446. 

¶36 Here, Steadfast's policy expressly provided for 

subrogation:

In the event of any payment under this policy, we 

shall be subrogated to all an "insured's" rights of 

recovery against any person or organization. 

MMSD's right of recovery against Greenwich to which Steadfast is 

contractually subrogated arises from Greenwich's breach of its 

contractual obligation to defend MMSD. Accordingly, we examine 

Steadfast's alleged right of recovery against Greenwich as an 

express contractual subrogation right that arose from MMSD's 

right to a defense from Greenwich. 
No. 2016AP1631 

16

¶37 Subrogation does not change the type of claim for 

relief that was held by the subrogor. Wilmot, 136 Wis. 2d at 63 

(explaining that "the identity of a cause of action is not 

changed by the subrogation, and no new cause of action is 

created thereby."). Because "[t]he original right of the 

plaintiff measures the extent of the subrogated party's right," 

the statute of limitations for a subrogated claim is the same as 

the statute of limitations that would apply to the claim if it 

had not been subrogated. Gen. Accident Ins. Co. of Am. v. 

Schoendorf & Sorgi, 202 Wis. 2d 98, 109, 549 N.W.2d 429 (1996). 

Wisconsin has a six-year statute of limitations for breach of 

contract claims. Wis. Stat. § 893.43(1) (2015-16).8 Steadfast 

was subrogated to MMSD's contract claim that Greenwich breached 

its duty to defend.

¶38 Steadfast paid MMSD's debt for defense costs, which 

included what Greenwich was obligated to provide as well as 

Steadfast's own portion of MMSD's defense costs, when it paid 

MMSD $1.55 million. Because subrogation does not change the 

identity of the cause of action, Steadfast's claim against 

Greenwich is also for breach of contract. Claims for breach of 

contract have a six-year statute of limitations. Wis. Stat. 

§ 893.43(1). Steadfast's action was filed less than six years 

after Greenwich's breach occurred, therefore, it was timely 

filed.

 

8 All subsequent references to the Wisconsin Statutes are to 

the 2015-16 version unless otherwise indicated.
No. 2016AP1631 

17

4. Allocation of Defense Costs

¶39 Steadfast and Greenwich each had a contractual duty to 

defend MMSD. Because MMSD chose to pay for its own defense, it 

incurred $1.55 million in stipulated defense costs. Steadfast 

paid $1.55 million to MMSD; however, part of that payment was 

attributable to the defense that Steadfast, itself, was 

obligated to provide. 

¶40 The circuit court and the court of appeals ignored the 

financial import of Steadfast's own duty to defend MMSD. 

Instead, both courts focused on Greenwich's failure to defend 

and adjudged the full amount of MMSD's defense costs as being 

due from Greenwich to Steadfast.9 In so doing, they relieved 

Steadfast of its contractual obligation for defense costs, 

without recognition of the windfall that Steadfast received from 

what amounted to a judicial forgiveness of Steadfast's duty to 

defend MMSD. This placed Steadfast (as subrogee) in a better 

position than MMSD (the subrogor) from whom Steadfast obtained 

the contractual right of subrogation. To explain further, MMSD 

litigated the defense through attorneys of its own choosing, but 

it received no windfall when it was repaid $1.55 million in 

litigation costs it actually incurred. Here, Steadfast obtained 

 

9 The circuit court concluded that Greenwich waived the 

right to raise coverage defenses by its breach of the duty to 

defend. The court of appeals concluded that because Greenwich 

breached its duty to defend MMSD, it was not equitably entitled 

to an allocation of a portion of MMSD's defense costs to 

Steadfast. Steadfast Ins. Co., 380 Wis. 2d 184, ¶4.
No. 2016AP1631 

18

litigation costs beyond what it incurred in satisfying its duty 

to defend. 

¶41 We conclude that both Steadfast and Greenwich had a 

duty to provide a defense to MMSD. Accordingly, the financial 

sanction of an insurer who fails in its duty to defend does not 

include judicial forgiveness of another insurer's financial 

obligation for defense costs. Therefore, we conclude that the 

$1.55 million in defense costs that Steadfast paid should be 

allocated between Steadfast and Greenwich. 

¶42 We have not directly addressed the proper formula for 

allocating defense costs when two insurers have a duty to defend 

the same insured. See Burgraff v. Menard, Inc., 2016 WI 11, 

¶111, 367 Wis. 2d 50, 875 N.W.2d 596 (Roggensack, C.J., 

dissenting). However, in a well-reasoned opinion, the Utah 

Supreme Court addressed the question of allocation of defense 

costs between insurers, each of whom had a duty to defend. Ohio 

Cas. Ins. Co. v. Unigard Ins. Co., 268 P.3d 180, 185-86 (Utah 

2012). In Ohio Cas., the court noted the obligation of each 

insurer to participate in defense costs and under the facts of 

Ohio Cas., which involved a long term exposure, the court chose 

the time-on-risk method of defense cost apportionment.10 

 

10 Time-on-risk method of apportionment weights the defense 

costs by the time that each policy was at risk for actions of 

its insured that could require coverage. Sharon Steel Corp. v. 

Aetna Cas. & Sur. Co., 931 P.2d 127, 140 (Utah 1997) (explaining 

that damages based on the relative period of time for which 

coverage was provided under each policy is an equitable method 

of apportionment of defense costs). 
No. 2016AP1631 

19

Apportionment also may be done on an equal division among 

insurers, and it has been ordered based on respective policy 

limits. Sharon Steel Corp. v. Aetna Cas. & Sur. Co., 931 P.2d 

127, 140 (Utah 1997). In discussions of apportionment, there 

has been a uniform recognition of the obligation for defense 

costs that both insurers faced. 

¶43 In equal apportionment, defense costs are distributed 

equally among any insurers with a duty to defend, for example 

with two insurers each would pay one-half, with three insurers 

each would pay one-third. See, e.g., Cargill, Inc. v. Ace Am.

Ins. Co., 784 N.W.2d 341 (Minn. 2010). This method is easy to 

apply; however, it could lead to unfairness and upset the 

parties' reasonable expectations if one insurer insures for 

lesser policy limits and charges a lower premium. See, e.g., 

Sharon Steel Corp., 931 P.2d at 140 (pointing out that "insurers 

do not stand on an equal footing where there are significantly 

different liability limits.").

¶44 The third option is to apportion defense costs pro 

rata, based on the parties' policy limits. For example, if 

insurer A's policy limit is $1 million, and insurer B's policy 

limit is $2 million, insurer A will be responsible for one-third 

of defense costs. We have suggested that this is the preferred 

approach. See Schoenecker, 88 Wis. 2d at 671; Oelhafen, 171 

Wis. 2d at 537 ("The proportion [each insurer contributes toward 

the insured's loss] usually is based on their respective policy 

limits."). This approach better reflects the insurance 

companies' respective bargains. See, e.g., Armstrong World 
No. 2016AP1631 

20

Indus., Inc. v. Aetna Cas. & Sur. Co., 52 Cal. Rptr. 2d 690, 707 

(Cal. Ct. App. 1996) (explaining that apportioning damage 

reflects that higher premiums generally are paid for higher per 

person or per liability limits). Accordingly, we conclude that 

pro rata allocation based on insurers' policy limits is the best 

method for apportionment of defense costs in the matter before 

us. 

¶45 Here, Steadfast paid $1.55 million for MMSD's defense 

costs. Greenwich and Steadfast have stipulated that this was 

the "reasonable and necessary" cost of MMSD's defense. 

Greenwich's policy limit was $20 million. Steadfast's policy 

limit was $30 million. Therefore, Greenwich owed two-fifths of 

$1.55 million in defense costs and Steadfast was responsible for 

three-fifths of those costs. Accordingly, Steadfast is entitled 

to recover from Greenwich $620,000, plus interest accruing on 

that amount from the date of entry of the circuit court's 

judgment. Wis. Stat. § 815.05(8).11 

5. Attorney Fees

¶46 We conclude that Steadfast also is entitled to recover 

attorney fees from Greenwich under principles of contractual 

subrogation. We have held that when an insurer breaches its 

duty to defend, it may be liable for attorney fees incurred by 

its insured in successfully establishing coverage. Elliott v. 

 

11 We do not address whether Wis. Stat. § 628.46 applies to 

claims made within Steadfast's contractual subrogation clause 

because neither party addressed § 628.46. 
No. 2016AP1631 

21

Donahue, 169 Wis. 2d 310, 324-25, 485 N.W.2d 403 (1992). See 

also Newhouse, 176 Wis. 2d at 837 ("[W]here an insurer 

wrongfully refuses to defend on the grounds that the claim 

against the insured is not within the coverage of the policy, 

the insurer is guilty of a breach of contract which renders it 

liable to the insured for all damages that naturally flow from 

the breach."). 

¶47 As we have explained above, Steadfast had rights of 

contractual subrogation based on its payment to MMSD. 

Therefore, Steadfast asserted rights that MMSD had against 

Greenwich for failing to defend. Stated otherwise, if MMSD were 

to sue Greenwich to recover defense costs, it would have been 

entitled to the attorney fees and costs incurred in such 

litigation. Id. at 838. Here, by virtue of its express 

subrogation rights, Steadfast stands in MMSD's shoes and seeks 

attorney fees incurred in obtaining a judgment against Greenwich 

for payment of defense costs just as MMSD could have recovered 

were it to have brought this lawsuit. 

¶48 Although Wisconsin courts have not yet awarded 

attorney fees for breach of a duty to defend to an insurer who

was subrogated to an insured's rights, neither the principles of 

contractual subrogation, nor the rationale behind attorney fee 

awards for breach of a duty to defend, foreclose this result. 

However, other states have approached this question. The 

decisions of the Supreme Court of California and of Florida have 

provided helpful discussions.
No. 2016AP1631 

22

¶49 In Emp'rs Mut. Liab. Ins. Co. v. Tutor-Saliba Corp., 

951 P.2d 420 (Cal. 1998), a subcontractor's employee was injured 

on the job. The subcontractor's insurer paid worker's 

compensation, which made it "subrogated to all of the rights and 

liabilities" of the subcontractor. Id. at 424. The underlying 

contract between the subcontractor and general contractor stated 

that in any dispute between the two, the prevailing party was 

entitled to attorney fees. Id. at 422. The subrogated insurer 

unsuccessfully sued the general contractor to recover its 

worker's compensation payment. Id. The California Supreme 

Court held that as the prevailing party, the general contractor 

would be entitled to recover attorney fees from the subrogated 

insurer: "the insurer should likewise be subrogated to——i.e., 

both benefited and bound by——any contract providing for attorney 

fees to a prevailing party that the employer and the third party 

have executed." Id. at 424. While this involved an award of 

attorney fees against the subrogee, the court held that the 

subrogee was "both benefited and bound by" the attorney fee 

provision. Id.

¶50 Florida's supreme court appears to have followed suit. 

In Cont'l Cas. Co. v. Ryan Inc. E., 974 So. 2d 368 (Fla. 2008), 

it held that a subrogee surety could not pursue attorney fees 

against the principal's insurer, but only because the principal 

still had the right to pursue attorney fees. Id. at 377. If 

the principal had assigned all its rights to the surety via 

contractual subrogation, the surety would have been able to 

recover attorney fees. Id.
No. 2016AP1631 

23

¶51 Their reasoning is persuasive. We conclude that a 

contractual subrogee's right to recovery may include an award of 

attorney fees the subrogor would have been entitled to receive 

had it brought the lawsuit. We have long recognized that 

contractual subrogation "entitl[es] the paying party to rights, 

remedies, or securities that would otherwise belong to the 

debtor." Dufour, 370 Wis. 2d 313, ¶15; see also Wilmot, 136 

Wis. 2d at 63. We decline to create an exception to this 

longstanding rule by excluding attorney fees from the bundle of 

contractual subrogation rights that arise from a specific 

subrogation clause upon payment by the subrogee. 

¶52 In this case, Greenwich breached its duty to defend, 

so MMSD had the right to request attorney fees for successfully 

establishing Greenwich's obligation to defend. Steadfast's 

contract with Veolia and MMSD stated in relevant part: "In the 

event of any payment under this policy, we shall be subrogated 

to all an 'insured's' rights of recovery against any person or 

organization." Because MMSD's "rights of recovery" against 

Greenwich would include attorney fees incurred in successfully 

establishing coverage, Steadfast is entitled to recover $325,000 

in attorney fees from Greenwich as MMSD's subrogee, plus 

interest accruing on that amount from the date of entry of the 

circuit court's judgment. Wis. Stat. § 815.05(8). Furthermore, 

nothing in this opinion prevents Steadfast from moving the 

circuit court for an award of attorney fees incurred in 

litigating the appeal and our review herein.
No. 2016AP1631 

24

III. CONCLUSION

¶53 First, we conclude that Greenwich, who insured the 

risk that United Water would negligently perform services for 

MMSD, thereby causing damage, and Steadfast, who for a different 

period of time insured the risk that Veolia would negligently 

perform services for MMSD, thereby causing damage, were both 

primary and successive insurers in regard to MMSD, their common 

additional insured. 

¶54 Second, we conclude that Greenwich breached its 

contractual duty to defend MMSD. Third, we conclude that 

Steadfast's contractual subrogation claim against Greenwich was 

timely filed as it comes within the six-year statute of 

limitations for contract actions. 

¶55 Fourth, we apply a pro-rata allocation of defense 

costs Steadfast paid to MMSD based on Steadfast's and 

Greenwich's respective policy limits of $30 million and $20 

million. Fifth, and finally, we conclude that Steadfast is 

entitled to recover attorney fees from Greenwich due to 

Steadfast's stepping into the shoes of MMSD through contractual 

subrogation to force Greenwich to pay defense costs. 

¶56 Accordingly, we affirm the decision of the court of 

appeals in part and reverse it in part.

By the Court.—The decision of the court of appeals is 

affirmed in part and reversed in part.
No. 2016AP1631.awb

1

¶57 ANN WALSH BRADLEY, J. (concurring in part, 

dissenting in part). I agree with the majority that the "other 

insurance" provisions are not triggered. Additionally, I agree 

that Greenwich breached its duty to defend, and that Steadfast's 

claim sounds in subrogation and not contribution.1

¶58 I write separately, however, because the majority errs 

in two ways. First, it allocates defense costs between 

Steadfast and Greenwich, allowing Greenwich to breach its duty 

to defend with impunity. Second, it awards attorney fees to 

Steadfast in derogation of the longstanding American Rule.

¶59 An insurer that breaches the duty to defend should not 

be able to escape liability for the consequences of its 

behavior. Our case law is clear that an insurer who refuses to 

defend its insured proceeds at its own peril. Olson v. Farrar, 

2012 WI 3, ¶30, 338 Wis. 2d 215, 809 N.W.2d 1.

¶60 Yet, the majority extinguishes the peril, allowing a 

breaching insurer to refuse to uphold its duty to defend with 

the security that it will suffer no financial consequence. In 

doing so, it encourages a game of chicken between insurers that 

may leave the insured as the only loser.

¶61 Further, our case law dictates that exceptions to the 

American Rule be limited and narrow. Nevertheless, the majority 

goes where no court has previously ventured.

¶62 In expanding the exception to the American Rule by 

awarding attorney fees from one insurance company to another, 

 

1 I join parts II.B.1, II.B.2, and II.B.3 of the majority 

opinion.
No. 2016AP1631.awb

2

one wonders what is next. The majority's determination crafts a 

new exception to the American Rule that is unsupported by case 

law and that chips away at the vitality of the Rule. I fear 

that "once the camel's nose is in the tent, the rest will likely 

follow."

¶63 Accordingly, I concur in part and dissent in part.2

I

¶64 The majority errs first in its determination that 

Greenwich is not liable for the entirety of MMSD's defense 

costs. Instead, it pro-rates costs, turning the purpose of this 

court's coverage framework on its head and creating a perverse 

incentive for insurers to fail to uphold their duty to defend.

¶65 As the majority recognizes, this court has established 

a preferred framework for an insurance company to follow when it 

disputes coverage. Majority op., ¶29 (citing Wis. Pharmacal 

Co., LLC v. Neb. Cultures of Cal., Inc., 2016 WI 14, ¶18, 367 

Wis. 2d 221, 876 N.W.2d 72). Pursuant to such a framework, "the 

proper procedure for an insurance company to follow when 

coverage is disputed is to request a bifurcated trial on the 

issues of coverage and liability and move to stay any 

proceedings on liability until the issue of coverage is 

resolved." Newhouse by Skow v. Citizens Sec. Mut. Ins. Co., 176 

Wis. 2d 824, 836, 501 N.W.2d 1 (1993) (citing Elliott v. 

Donahue, 169 Wis. 2d 310, 318, 485 N.W.2d 403 (1992)). When an 

 

2 I dissent from parts II.B.4 and II.B.5 of the majority 

opinion.
No. 2016AP1631.awb

3

insurer follows this procedure, the insurer runs no risk of 

breaching its duty to defend. Id.

¶66 An insurer who unilaterally refuses to defend does so 

at its own peril. Olson, 338 Wis. 2d 215, ¶30. Accordingly, 

the "general rule is that where an insurer wrongfully refuses to 

defend on the grounds that the claim against the insured is not 

within the coverage of the policy, the insurer is guilty of a 

breach of contract which renders it liable to the insured for 

all damages that naturally flow from the breach." Newhouse, 176 

Wis. 2d at 837.

¶67 Indeed, this court in Water Well Solutions Serv.

Group, Inc. v. Consolidated Ins. Co. recently warned that "an 

insurer opens itself up to a myriad of adverse consequences if 

its unilateral duty to defend determination turns out to be 

wrong." 2016 WI 54, ¶28, 369 Wis. 2d 607, 881 N.W.2d 285. An 

insurer's liability "may potentially be greater than what the 

insurer would have paid had it defended its insured in the first 

instance . . . ." Id.

¶68 Our established framework encourages insurers to 

fulfill their duty to defend and thereby avoids negative 

outcomes for both insurers and insureds. "A unilateral refusal 

to defend without first attempting to seek judicial support for 

that refusal can result in otherwise avoidable expenses and 

efforts to litigants and courts, deprive insureds of their 

contracted-for protections, and estop insurers from being able 

to further challenge coverage." Liebovich v. Minnesota Ins. 

Co., 2008 WI 75, ¶55, 310 Wis. 2d 751, 751 N.W.2d 764.
No. 2016AP1631.awb

4

¶69 The majority effectively rewards Greenwich for 

ignoring this court's established framework and allows Greenwich 

to escape the consequences of its willful breach of the duty to 

defend. By allowing Greenwich to pay pro-rated costs, the 

majority lessens the impact of the insurer's breach of the duty 

to defend. It further encourages future insurers to follow a 

similar course rather than seeking a bifurcated coverage trial 

as this court has recommended numerous times.

¶70 According to the majority, Greenwich should suffer no 

consequence at all for breaching the duty to defend. It pays 

merely what it would have paid anyway if it had lived up to its 

duty to defend in the first instance.

¶71 The result of the majority opinion is the 

proliferation of a game of chicken between insurers. See

Southeast Wis. Prof'l Baseball Park Dist. v. Mitsubishi Heavy 

Indus. Am., Inc., 2007 WI App 185, ¶64, 304 Wis. 2d 637, 738 

N.W.2d 87. When there are two or more insurers from whom 

coverage is sought, what incentive is there to provide coverage 

if an insurer can simply refuse to defend the case and end up 

paying the exact same amount later in the event it is sued? 

Each insurer would simply hold out and hope that someone else 

takes on the defense.

¶72 Rather than encouraging insurers to live up to their 

contractual obligations, the majority opinion allows insurers to 

rest comfortably in their decisions to deny a defense with the 

knowledge that if a breach is later found, no financial 

consequence will be forthcoming. The only loser in this game is 
No. 2016AP1631.awb

5

the insured, who may be forced to expend resources for a defense 

that should have been covered by insurance from the beginning.

¶73 Unlike the majority, I conclude that there must be 

some element of penalty and deterrence to encourage insurance 

companies to defend when they are obligated. See Water Well, 

369 Wis. 2d 607, ¶28. I thus determine that Greenwich is liable 

for the full cost of MMSD's defense.

¶74 My conclusion is further buttressed by the fact that 

Greenwich's insurance policy does not contain a pro-ration 

clause. Where a policy contains no pro-ration language, this 

court is not to rewrite the policy to include it. Plastics 

Eng'g Co. v. Liberty Mut. Ins. Co., 2009 WI 13, ¶59, 315 

Wis. 2d 556, 759 N.W.2d 613. Yet by pro-rating defense costs, 

the majority gives Greenwich the benefit of a bargain it did not 

make.

¶75 Accordingly, I dissent from part II.B.4 of the 

majority opinion, which effectively eliminates any incentives 

for insurance companies to promptly defend lawsuits and fails to 

encourage insurers to follow this court's preferred framework 

for determining insurance coverage.

II

¶76 The majority errs further in its determination that 

Steadfast is entitled to attorney fees incurred in litigating 

this case. It fails to heed this court's warning that 

exceptions to the American Rule are to be limited and narrow. 

Instead, it opens up a new exception that is contrary to clear 

precedent that arrives at a directly opposite outcome.
No. 2016AP1631.awb

6

¶77 Generally, we adhere to the American Rule, which 

provides that parties to litigation are responsible for their 

own attorney fees unless recovery is expressly allowed by either 

contract or statute, or when recovery results from third-party 

litigation. DeChant v. Monarch Life Ins. Co., 200 Wis. 2d 559, 

571, 547 N.W.2d 592 (1996). Absent statutory authority or a 

contractual provision to the contrary, Wisconsin courts strictly 

follow this rule. Id.

¶78 In the insurance coverage context, analysis of 

entitlement to attorney fees begins with Elliott v. Donahue, 169 

Wis. 2d 310. The Elliott court determined that Wis. Stat. 

§ 806.04(8), "which recognizes the principles of equity, permits 

the recovery of reasonable attorney fees incurred by the insured 

in successfully establishing coverage." Id. at 314. It 

concluded that attorney fees were appropriate under the specific 

facts that were present:

The insurer that denies coverage and forces the 

insured to retain counsel and expend additional money 

to establish coverage for a claim that falls within 

the ambit of the insurance policy deprives the insured 

the benefit that was bargained for and paid for with 

the periodic premium payments. Therefore, the 

principles of equity call for the insurer to be liable 

to the insured for expenses, including reasonable 

attorney fees, incurred by the insured in successfully 

establishing coverage.

Id. at 322.

¶79 Subsequent case law has limited the application of 

Elliott to its facts. Specifically, in Riccobono v. Seven Star, 

Inc., the court of appeals denied a claim for attorney fees by

one insurer against a second insurer. 2000 WI App 74, 234 
No. 2016AP1631.awb

7

Wis. 2d 374, 610 N.W.2d 501. The Riccobono court reasoned: "In 

defining the dispute in Elliott, the supreme court stated: 'The 

sole issue on review concerns whether an insured may recover 

attorney fees incurred in successfully defending coverage under 

an insurance policy.'" Id., ¶22. It then distinguished the 

facts present in Riccobono from those in Elliott, writing that

"Society is not an insured and, thus, does not appear to fall 

within the holding of the supreme court." Id., ¶22.

¶80 The Riccobono court found it dispositive that the 

identity of the party seeking attorney fees was an insurer and 

not an insured. On this issue, Riccobono is on all fours with 

this case. Curiously, the majority fails to even mention 

Riccobono.

¶81 Despite the majority's silence, Riccobono instructs

that attorney fees are not available to Steadfast because it is 

an insurer, and not an insured. Even with such an instruction 

in hand, an additional step is required in the analysis due to
No. 2016AP1631.awb

8

the fact that Steadfast's claim is one for subrogation, i.e., it 

steps into the shoes of its insured.3

¶82 Finding the nature of Steadfast's subrogation claim 

dispositive, the majority turns to the case law of other 

jurisdictions in support of its result. Majority op., ¶¶48-51. 

Because MMSD would have been entitled to attorney fees, the 

majority reasons, so is Steadfast. Id., ¶47. I do not find 

this approach persuasive.

¶83 The court of appeals in Riccobono was clear that 

Elliott "does not encompass the payment of attorney fees and 

costs from one insurer to another . . . ." 234 Wis. 2d 374, ¶2. 

The driving factor behind the Elliott decision was that the 

insured retained independent counsel who established that 

coverage existed. See Gorton v. Hostak, Henzl & Bichler, S.C., 

217 Wis. 2d 493, ¶¶32-33, 577 N.W.2d 617 (1998).

 

3 Although the insurer requesting attorney fees in Riccobono

sought such fees pursuant to a theory of subrogation, the court 

of appeals did not address this argument because it determined 

that the insurer was not entitled to subrogation under the 

language of the policy. Riccobono v. Seven Star, Inc., 2000 WI 

App 74, ¶28, 234 Wis. 2d 374, 610 N.W.2d 501. As the court 

stated, "the conditions under which Society might have been 

subrogated to Seven Star's right to attorney fees and costs 

never came into fruition." Id., ¶28. Nevertheless, the 

Riccobono court's declaration that attorney fees are not 

available under Elliott when one insurer seeks attorney fees 

from another insurer is consistent with this court's previous 

reluctance to extend Elliott beyond its particular facts and 

circumstances regardless of whether the insurer is a subrogated 

party. See DeChant v. Monarch Life Ins. Co., 200 Wis. 2d 559, 

569, 547 N.W.2d 592 (1996); Elliott v. Donahue, 169 Wis. 2d 310, 

485 N.W.2d 403 (1992).
No. 2016AP1631.awb

9

¶84 This court has expressly declined to extend Elliott

beyond its particular facts and circumstances. Id., ¶33 (citing 

DeChant, 200 Wis. 2d at 569); see also Reid v. Benz, 2001 WI 

106, ¶13, 245 Wis. 2d 658, 629 N.W.2d 262 ("The facts and 

circumstances that gave rise to our decision in Elliott are 

particularly significant, because our reasoning therein is 

inextricably connected to those facts and circumstances."). 

Instead, we have adhered to the maxim that exceptions to the 

American Rule should be "limited and narrow." Gorton, 217 

Wis. 2d 493, ¶33; Nationstar Mortg. LLC v. Stafsholt, 2018 WI 

21, ¶27, 380 Wis. 2d 284, 908 N.W.2d 784. "Awarding attorney 

fees, as we did in Elliott, should not be the usual result." 

Reid, 245 Wis. 2d 658, ¶27.

¶85 Although generally Steadfast steps into MMSD's shoes

when pursuing a subrogation claim, to do so here flies in the 

face of clear precedent. To allow such subrogated status to one 

insurer seeking to recover attorney fees from another insurer 

extends far beyond the "particular facts and circumstances" of 

Elliott. See DeChant, 200 Wis. 2d at 569. Unlike the majority, 

I would follow our case law indicating that such exceptions to 

the American Rule must be narrowly circumscribed.

¶86 Accordingly, I dissent from part II.B.5 of the 

majority opinion because it allows an insurer to recover 

attorney fees from another insurer, contravening the longestablished American Rule.

¶87 In sum, for the reasons set forth above, I 

respectfully concur in part and dissent in part.
No. 2016AP1631.awb

10

¶88 I am authorized to state that Justice REBECCA FRANK 

DALLET joins this concurrence/dissent.
No. 2016AP1631.rgb

1

¶89 REBECCA GRASSL BRADLEY, J. (concurring in part, 

dissenting in part). I agree with the majority that an 

insured's defense costs should be allocated between insurers who 

share a contractual, overlapping duty to defend the insured. I 

also agree that the allocation between insurers should be pro 

rata, based upon each insurer's policy limits. Accordingly, I 

join part II.B.4 of the majority opinion to the extent it adopts 

these legal principles. However, I disagree with the majority's 

conclusion that Greenwich is responsible for any portion of 

defense costs paid on behalf of MMSD. Vis-à-vis Steadfast's 

policy of insurance covering MMSD, Greenwich's policy was excess 

over Steadfast's, relieving Greenwich of any obligation to 

contribute to MMSD's defense, which Steadfast was already 

providing. The majority erroneously concludes otherwise, 

deeming both Steadfast and Greenwich to be primary insurers, 

each with a duty to defend MMSD in the consolidated lawsuits 

stemming from the 2008 rain event. In reaching this result, the 

majority declines to apply clear and unambiguous policy language 

dictating a different priority of insurance, instead applying an 

offhanded statement in a case involving an unrelated issue with 

no application here. The majority errs. I would reverse the 

judgment against Greenwich in its entirety.1 

 

1 Because I conclude that Greenwich had no duty to defend, I 

do not address the remaining issues resolved by the majority 

because they are moot unless Greenwich had a duty to defend. I 

do agree with Justice Ann Walsh Bradley's dissent to the extent 

it would deny recovery of attorney fees by one insurer against 

another.
No. 2016AP1631.rgb

2

I

¶90 Insurance policies are contracts. Wadzinski v. AutoOwners Ins. Co., 2012 WI 75, ¶11, 342 Wis. 2d 311, 818 

N.W.2d 819. When interpreting contracts, we presume the 

parties' intentions are expressed in the language they chose. 

Id. Accordingly, when construing policy terms and conditions, 

we begin with their plain language. See Johnson Controls, Inc. 

v. London Mkt., 2010 WI 52, ¶59, 325 Wis. 2d 176, 784 N.W.2d 579 

("Wisconsin case law instructs that the language of the policy

should be our initial focus."); see also BV/B1, LLC v. 

InvestorsBank, 2010 WI App 152, ¶25, 330 Wis. 2d 462, 792 

N.W.2d 622 ("When interpreting a contract clause, we begin with 

the plain language of the clause."). "When the language of [an 

insurance] contract is unambiguous, we apply its literal 

meaning." Wisconsin Label Corp. v. Northbrook Prop. & Cas. Ins. 

Co., 2000 WI 26, ¶23, 233 Wis. 2d 314, 607 N.W.2d 276. 

Interpretation of policy language is a question of law we review 

de novo. Wadzinski, 342 Wis. 2d 311, ¶10.

¶91 As a general rule, a primary insurer "has the primary 

duty to defend a claim" while an excess insurer is not required 

to contribute to the defense as long as "the primary insurer is 

required to defend." Johnson Controls, Inc., 325 Wis. 2d 176, 

¶57 (quoted source omitted). "Whenever two policies apply to 

the same insured at the same time, the issue of which policy 

must pay first——or which is primary and which is excess——is 

dealt with by other insurance clauses." Burgraff v. Menard, 

Inc., 2016 WI 11, ¶27, 367 Wis. 2d 50, 875 N.W.2d 596 (quotation 
No. 2016AP1631.rgb

3

marks and quoted source omitted). In such situations, the 

insurers may, by the terms of their policies, "define the extent 

to which each is primary and each excess[.]" Wis. Stat. 

§ 631.43(1); see also Burgraff, 367 Wis. 2d 50, ¶27.2 Regardless 

of its status as primary or excess, whether an insurer has a 

duty to defend "depends on the language of the policies." 

Johnson Controls, Inc., 325 Wis. 2d 176, ¶58 (emphasis added). 

II

¶92 While Steadfast and Greenwich issued their respective 

policies to two different primary insureds, neither party 

disputes that both policies cover the same additional insured: 

MMSD. It is MMSD's losses——namely, defense costs——that are at 

issue in this case. Therefore, the focus should be on MMSD as 

the insured, not United Water or Veolia. Instead, the majority 

views coverage from the standpoint of the primary insureds——

United Water and Veolia——who are entirely removed from this 

coverage litigation: "Greenwich's policy insured the risk that 

United Water's conduct in managing the Milwaukee sewerage system 

during the policy period would be negligent . . . Steadfast's 

policy insured the risk that Veolia would negligently manage the 

Milwaukee sewerage system during the policy period[.]" Majority 

op., ¶¶23, 24. The negligence of United Water and Veolia are 

irrelevant for purposes of determining the respective insurers' 

 

2 This holds true unless "the policies contain inconsistent 

terms on that point," in which case "the insurers shall be 

jointly and severally liable to the insured on any coverage 

where the terms are inconsistent[.]" Wis. Stat. § 631.43(1).
No. 2016AP1631.rgb

4

duty to defend MMSD, a different insured altogether. By framing 

the issue incorrectly, the majority's analysis collapses at the 

outset.

¶93 The language of Greenwich's and Steadfast's insurance 

contracts determines whether Greenwich and Steadfast provide 

primary or excess coverage to MMSD. Under the "PROFESSIONAL 

LIABILITY" section of its policy, Greenwich agreed "[t]o pay on 

behalf of the INSURED all LOSS in excess of the Retention 

amount . . . as a result of CLAIMS first made against the

INSURED . . . during the POLICY PERIOD . . . by reason of any 

act, error or omission in PROFESSIONAL SERVICES 

rendered . . . by the INSURED or by any person whose acts, 

errors or omissions the INSURED is legally responsible."3 Under 

the separate "CONTRACTOR'S POLLUTION LEGAL LIABILITY" section of 

its policy, Greenwich agreed "[t]o pay on behalf of the INSURED 

all LOSS, in excess of the Retention amount . . . as a result of 

an OCCURRENCE which arises out of CONTRACTING SERVICES and which 

first commenced during the POLICY PERIOD." Under the policy, 

"LOSS"——what Greenwich is contractually obligated to pay to or 

on behalf of MMSD——means not only "DAMAGES [i.e., a "monetary 

judgment, award or settlement of compensatory damages"] which 

the INSURED shall become legally obligated to pay as a result of 

a CLAIM" but also "CLAIMS EXPENSE." Under the policy, "CLAIMS 

EXPENSE" includes "all other fees, costs . . . and expenses 

resulting from the . . . defense . . . of such CLAIM, if 

 

3 Capitalization appears in Greenwich's policy to signify 

defined terms. 
No. 2016AP1631.rgb

5

incurred . . . with the written consent of the Company, by the 

INSURED." In simpler terms, Greenwich insured MMSD not only for 

"DAMAGES" MMSD would become legally obligated to pay as a result 

of a covered claim (here there were none) but also "CLAIMS 

EXPENSE," which includes attorney fees incurred by MMSD in 

defending against such a claim, regardless of whether MMSD 

became legally obligated to pay damages to a third party. 

Despite the fact that only "CLAIMS EXPENSE" and not "DAMAGES" 

are at issue in this case, the majority ignores in its analysis 

of Greenwich's duty to defend the fact that "CLAIMS EXPENSE" 

constitutes MMSD's exclusive "LOSS."

¶94 Steadfast's policy similarly promises to "pay on 

behalf of an 'insured' any 'loss' an 'insured' is legally 

obligated to pay as a result of a 'claim[.]'" Steadfast's 

policy defines "Loss" to mean both (1) "Compensatory damages or 

legal obligations arising from 'Bodily injury'" or "Property 

damage" and (2) "Related 'claim expense.'" Under Steadfast's 

policy, "Claim expenses" include attorney fees and "[a]ll other 

fees, costs and expenses resulting from the defense . . . of a 

'claim' if incurred by" Steadfast or MMSD with Steadfast's 

consent. 

¶95 In the underlying rain event litigation, no damages 

were awarded or paid to the plaintiffs for their claims against 

MMSD. MMSD sustained no "loss" under the first prong of that 

definition in either Greenwich's or Steadfast's policies. 

Instead, MMSD's "loss" as defined in each policy was limited to 

attorney fees incurred in defending against the rain event 
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claims, included under the second prong of "loss" in each policy 

and denominated as "CLAIMS EXPENSE" under Greenwich's policy and 

as "Claim expenses" under Steadfast's policy. Although MMSD was 

never found liable in the rain event litigation, nor did it 

agree to pay damages in settlement of that litigation, MMSD did

incur an insurable loss under the policies, in the form of

attorney fees incurred in its defense.

¶96 At this step in the analysis, I conclude that both 

Greenwich and Steadfast contractually agreed to pay MMSD's 

attorney fees in defending the rain event litigation. The 

analysis does not end there, however, because of course MMSD is 

not entitled to recover double its attorney fees, nor was MMSD 

entitled to duplicative defenses against the rain event claims. 

If multiple policies cover the same insured during the same 

period, then the policies' respective "other insurance" 

provisions determine which insurer is primary and which is 

excess. 

¶97 Greenwich's "other insurance" clause in its policy 

insuring MMSD provides in pertinent part: "this insurance shall 

be in excess of the Retention amount . . . and any other valid 

and collectible insurance available to the INSURED . . . unless 

such other insurance is written only as a specific excess 

insurance over the Limits of Liability provided in this policy." 

(Emphasis added.) While Greenwich contractually declares its 

insurance to be excess if other valid and collectible insurance 

is available to MMSD, Steadfast's "other insurance" provision is 
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markedly different. Steadfast designates its insurance as 

primary unless other primary insurance is available to MMSD: 

L. OTHER INSURANCE

1. The insurance provided under this policy is primary

insurance, except when:

a. Stated in the Declarations or by endorsement to 

apply in excess of or contingent upon the absence of 

other insurance; or

b. Any other primary insurance is available covering 

liability for any "claim" or "loss" . . . .

When this insurance is primary and the "insured" has 

other insurance which is stated to be applicable to 

the "claim" or "loss" on an excess basis, the amount 

of our liability under this policy shall not be 

reduced by the existence of such excess insurance.

(Emphasis added.) Both Greenwich and Steadfast agreed to pay 

MMSD's "loss" in the form of attorney fees incurred in defending 

the rain event litigation. Because Steadfast's policy provided 

valid and collectible insurance to MMSD for this particular 

loss, Greenwich's insurance covering this loss——attorney fees——

is excess. Steadfast's own policy declares its coverage to be 

primary unless (1) otherwise stated in the declarations or an 

endorsement, or (2) any other primary insurance is available. 

Neither condition exists under these facts.

¶98 No one disputes Steadfast had a duty to defend MMSD 

against the entire litigation, even though not all claims 

implicated Veolia, Steadfast's primary insured. See Fireman's 

Fund Ins. Co. of Wis. v. Bradley Corp., 2003 WI 33, ¶21, 261 

Wis. 2d 4, 660 N.W.2d 666 ("[W]hen an insurance policy provides 

coverage for even one claim made in a lawsuit, the insurer is 
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obligated to defend the entire suit.") Steadfast's "other 

insurance" provision states that its policy provides primary 

coverage. Greenwich also promised coverage for MMSD's defense 

costs, but its "other insurance" provision states that 

Greenwich's coverage is excess to any other valid and 

collectible insurance. Steadfast's contractual obligation to 

pay MMSD's defense costs constitutes "other valid and 

collectible insurance," rendering Greenwich an excess insurer as 

to that loss. 

¶99 Despite this straightforward and unambiguous policy 

language, the majority declines to interpret the "other 

insurance" clauses, inexplicably stating that "we do not 

interpret the terms of the 'other insurance' clauses because 

under the undisputed facts . . . Greenwich's 'other insurance' 

clause provided successive insurance to MMSD." Majority op., 

¶27. The majority does not explain how an "other insurance" 

clause grants any coverage to an insured. Although the majority 

contradictorily appears to have engaged in some interpretation 

of Greenwich's "other insurance" clause (but not Steadfast's), 

it does not include its analysis of that provision in the 

opinion. Instead, the majority examines only the "damages" 

aspect of "loss" despite the absence of any "damages" incurred 

by MMSD. Based solely on the "damages" for which MMSD could 

have been held liable (but was not), the majority holds that 

both insurers provided primary coverage "in regard to insuring 

MMSD's risk of damage[,]" majority op., ¶27, and therefore both 

had a duty to defend. Majority op., ¶39. The majority's 
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disregard for the actual and only "loss" incurred by MMSD——

attorney fees——generates its analytical error.

¶100 The majority concludes that "concurrent insurance is 

required before 'other insurance' clauses are triggered." 

Majority op., ¶26. But the majority ignores the concurrent 

coverage of the claim expense "loss" incurred by MMSD——attorney 

fees——during overlapping policy periods. No one disputes that 

both policies covered the 2008 rain event; therefore, the 

majority's conclusion that the policies were successive is 

logically impossible. The majority then quotes Plastics 

Engineering4 for the proposition that "[t]wo insurance policies 

cannot be concurrent unless they insured 'the same risk, and the 

same interest, for the benefit of the same person, during the 

same period.'" Majority op., ¶26. Relying upon the different 

contractors insured by each policy rather than the common 

insured (MMSD), the majority concludes that the policies were 

successive, not concurrent. This contradicts the actual 

language of the policies, which should have been the focus of 

analysis in this case. 

¶101 The majority's reliance on Plastics Engineering is 

misplaced. The case did not, as the majority maintains, hold 

that "[t]wo insurance policies cannot be concurrent unless they 

insured 'the same risk, and the same interest, for the benefit 

of the same person, during the same period.'" Majority op., 

¶26. Rather, the case addressed whether Wis. Stat. § 631.43(1) 

 

4 Plastics Eng'g Co. v. Liberty Mut. Ins. Co., 2009 WI 13, 

¶48, 315 Wis. 2d 556, 759 N.W.2d 613.
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applies to successive policies; it did not address "other 

insurance" clauses at all. Plastics Eng'g Co. v. Liberty Mut. 

Ins. Co., 2009 WI 13, ¶44, 315 Wis. 2d 556, 759 N.W.2d 613. The 

language the majority quotes from Plastics Engineering was 

lifted from an explanatory parenthetical in a citation to a law 

review article. Id., ¶48 (quoting Douglas R. Richmond, Issues 

and Problems in "Other Insurance," Multiple Insurance, and SelfInsurance, 22 Pepp. L. Rev. 1373, 1376-82 (1995)).5 Nothing in 

Plastics Engineering should be read as supplanting the actual 

policy language, which forms the contract between insurer and 

insured, with a mechanical analysis of whether the policies 

cover "the same risk, and the same interest, for the benefit of 

the same person, during the same period." Significantly, 

Greenwich's "other insurance" clause does not limit its excess 

position to only those policies insuring "the same risk, and the 

same interest, for the benefit of the same person, during the 

same period." Instead, Greenwich's insurance is excess if there 

is other valid and collectible insurance for the insured's loss—

—here, MMSD's attorney fees. 

¶102 The majority effectively discards the policy language 

in favor of loose generalizations from our case law. Whether 

Greenwich's policy was primary or excess (and whether Greenwich 

violated its contractual obligations) should be resolved by the 

 

5 In context, this statement appears to reflect a general 

description of how "other insurance" clauses operate. But a 

general description of how courts have dealt with "other 

insurance" clauses cannot rewrite the policy language the court 

is supposed to interpret and apply. 
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actual language of the insurance contracts that govern our 

analysis. See Johnson Controls, Inc., 325 Wis. 2d 176, ¶58 

(whether a duty to defend exists depends on the language of the 

policies). Instead, the majority centers its holding on a stray 

citation to a law review article, resulting in a misguided 

fixation on the claims made in the rain event litigation rather 

than MMSD's actual "loss." 

¶103 It is true that Greenwich had a duty to indemnify MMSD 

for "damages" MMSD may have been liable to pay as a result of 

the acts or omissions of United Water, while Steadfast had a 

duty to indemnify MMSD for damages MMSD may have been liable to 

pay as a result of the acts or omissions of Veolia. However, 

indemnification for such damages is not the issue here. MMSD 

did not incur any loss based on the acts or omissions of its 

contractors. Instead, the issue is which insurer was primary as 

to claim expenses, not damages. Both Greenwich and Steadfast

insured the same "loss," namely, MMSD's defense of the rain 

event litigation, and both policies were in effect for 

overlapping periods of time.

6 Because Steadfast provided other 

valid and collectible insurance for the attorney fees necessary 

to defend against the rain event litigation, Greenwich's policy 

 

6 Greenwich's pollution policy period was July 24, 2007 to 

July 24, 2008, and Steadfast's claims-made policy period was 

July 1, 2008 to July 1, 2009, with retroactive dates varying by 

coverage type and ranging from March 1, 1998 to June 11, 2008.
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provided excess coverage. Notably, MMSD did collect its defense 

costs from Steadfast.7 

¶104 Nothing prohibits an insurer from denying its 

insured's tender of defense and stating the grounds for this 

denial. See Water Well Sols. Serv. Grp. Inc. v. Consolidated 

Ins. Co., 2016 WI 54, ¶28, 369 Wis. 2d 607, 881 N.W.2d 285. 

While the insurer takes the risk that its coverage position will 

later be found incorrect, see id., there is nothing improper 

about taking this course of action, as Greenwich did. Based on 

its policy language and the existence of other valid and 

collectible insurance, Greenwich correctly determined that any 

coverage under its policy for MMSD's claim expenses necessary to 

defend the rain event litigation was excess to Steadfast's. It 

is irrelevant that Greenwich might ultimately have been liable 

to indemnify MMSD for any damages awarded against MMSD as a 

result of United Water's services; Steadfast was obligated to 

pay all the claim expenses necessary to resolve the entire 

litigation, and in fact Steadfast did so. An "insurer breaches 

the duty to defend by requiring the insured to incur attorney 

fees to defend . . . on the issue of liability and to litigate 

coverage simultaneously." Reid v. Benz, 2001 WI 106, ¶3, 245 

 

7 Steadfast maintains that Greenwich's "other insurance" 

clause does not apply because Steadfast's policy was not 

collectible, arguing that "MMSD will never be able to 'collect' 

on the Steadfast policy for any liability due to the vicarious 

liability of United Water." Steadfast commits the same error as 

the majority by focusing exclusively on the claims for damages 

instead of the common loss insured by both Greenwich and 

Steadfast: defense costs. 
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Wis. 2d 658, 629 N.W.2d 262. In this case, Steadfast paid 

MMSD's attorney fees incurred to defend against the rain event 

litigation; MMSD was not forced to bear the expense. And 

Steadfast——not MMSD——litigated coverage for defense costs. 

Accordingly, Greenwich did not breach any duty to defend MMSD; 

as an excess insurer with respect to defense costs, Greenwich 

had no obligation to provide a defense that MMSD was already 

receiving from its primary insurer.

¶105 The majority disregards applicable policy language, 

upsets the insurers' contractual allocation of risk, and binds 

Greenwich to a risk for which it did not bargain. I would apply 

the "other insurance" provisions of each contract and therefore 

reverse the judgment against Greenwich in its entirety, holding 

Greenwich had no duty to defend MMSD because its policy provided 

only excess coverage for MMSD's defense costs. Other than the 

principles of law regarding the pro rata allocation of defense 

costs between insurers set forth in part II.B.4 of the majority 

opinion, I respectfully dissent.
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